Chief marketing officers are less optimistic about the U.S. economy than they were in February, and marketing spending growth has slowed, according to a study released last month by Duke University's Fuqua School of Business and the American Marketing Association.
“The CMO Survey” has been conducted twice a year since 2008. The August report was based on an online survey of 531 senior marketers at b2b and b-to-c companies in the U.S., conducted between July 17 and Aug. 3.
When asked how optimistic they are about the overall U.S. economy on a scale of 0 to 100, with 0 being least optimistic and 100 most optimistic, marketers had an average response of 58.4, down from 63.4 in February.
“People expected that once the economy started to improve, it would stay at the same rate of improvement. That has not really happened,” said Christine Moorman, senior professor of business administration at the Fuqua School of Business and author of the report. “Things have sputtered out a little bit. I think the expectations were higher than what's being delivered.”
CMO optimism about the economy was at a low of 47.7 in February 2009. Since that time it has gradually improved, reaching 63.3 in February 2011 before plummeting to 52.2 in August 2011 amid higher unemployment, a decline in consumer spending and a decrease in new orders for capital goods.
“The election is partly responsible [for the most recent numbers]. People feel like we're in a holding period, waiting for the elections to be over,” Moorman said.
CMOs also reported lower forecasts for customer purchasing behavior than in February. When asked to look ahead to the next 12 months, 56.1% of CMOs responding said they expected an increase in customer purchase volume, compared to 64.0% in February. Also, 52.9% said they expected customers to buy more related products and services from their companies, compared to 62.1% in February. Only 30.4% of marketers said they expected new customers to enter the market, down from 37.4% in February.
CMOs also reported that marketing spending growth has slowed, with average marketing budgets projected to increase 6.4% over the next 12 months, down from an average of 8.1% growth forecast in February.
The survey also found that b2b marketing budget growth will lag b-to-c over the next 12 months.
The most significant growth will come from b-to-c product companies, whose average marketing budgets will increase 8.6% over the next 12 months, up from 3.3% projected in February. The next highest growth will come from b-to-c service companies, whose average marketing budgets are expected to grow 6.8% over the next 12 months, up from 4.6% forecast in February.
B2b service companies will increase their marketing budgets an average 6.2% over the next 12 months, the same as forecast in February. B2b product companies will increase marketing budgets an average 5.7% over the next 12 months, down significantly from the 13.2% growth forecast earlier.
“The profitability of services is definitely higher [than for products],” Moorman said, pointing to a possible explanation for higher growth in marketing budgets for b2b service companies than for b2b product companies.
B2b service companies will also increase their budgets for developing new products and services at a higher rate than other groups, the survey found.
The average budget increase for product and service development strategy over the next 12 months will be 4.2% among b2b service companies, compared to 2.8% for b-to-c product companies, 1.2% for b2b product companies and 1.0% for b-to-c service companies.
B2b service companies will also increase their budgets at a higher rate for diversification strategy than other groups—2.2%, compared to 1.7% for b-to-c product companies and 1.0% for b2b product companies and b-to-c service companies.
All groups will decrease their spending on market penetration strategy over the next 12 months, focusing instead on developing new products and services, and diversifying their portfolios of products and services.
“They are all doing much less market penetration,” Moorman said. “You can't keep doing what you've been doing. You have to try some new things.”